Ofwat urges more competition in water market

Regulator Ofwat said on Monday that introducing competition into the residential water market could be worth nearly £3bn and would provide financial and service benefits to customers.

As it stands, customers have no choice over which company to use and Ofwat said the financial benefits of opening up the market could be worth £2.9bn over 30 years.

Although the reductions to customer bills are likely to be small at around just £8 per year, the main benefits would be innovation, improved customer service, new offers and freedom of choice, which would end the retail monopoly.

Ofwat chief executive Cathryn Ross said: “The service offers from water companies can feel behind the curve compared to the innovation customers benefit from when buying other goods. The uncomfortable truth is that, when it comes to retail offers, water companies provide an analogue service in a digital age.

“Customers tell us they think they should have the freedom to choose and don’t understand why water is the only retail market in which there isn’t some form of competition.

“But, of course, this isn’t a one-way street. There are significant costs to be considered, and it will be important to ensure that customers are treated fairly in a competitive market and that vulnerable customers are protected. The decision for the government to make is whether the potential benefits outweigh the costs and risks.”

Ofwat has submitted its assessment to the government, which will decide whether in principle it wants to introduce competition and, if so, how and when to do so.